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4. At the beginning of the year, Poe’s capital account balance in the Resistance Partnership (in which Poe owns a 40% interest) was $200,000. During the year Poe contributed cash ($40,000) and propert...

4. At the beginning of the year, Poe’s capital account balance in the Resistance Partnership (in which Poe owns a 40% interest) was $200,000. During the year Poe contributed cash ($40,000) and property (basis $20,000, fair market value $30,000). Resistance reported ordinary income of $100,000 and tax-exempt income of $6,000. At the end of the year, the partnership distributed $6,000 of cash to Poe. On the K-1, the partnership shows that Poe had a $50,000 share of nonrecourse LLC debt at the end of the year. How much is Poe’s ending capital account balance? (15 points)

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Answer #1

Ending capital account (CA) balance is computed using the equation given below:

Ending CA = Opening balance + Additional investment + Share in ordinary income + Share in tax-exempt income - Cash distribution

= $200,000 + ($40,000 + $20,000) + ($100,000 * 40%) + ($6,000 *40%) - $6,000

= $296,400.

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